KAREL PALLA

The CMHC 15th Annual Housing Outlook at the Westin Bayshore was held on Monday, November 9, 2009.

Here were some of the key points from the conference.  Some obvious, some quite interesting.  Please keep in mind these are only notes.

BC Housing Outlook:

• Currently a sellers market
• 27,000 homes changed hands in 3^rd quarter – near record level
• Predicted 7 ½ % increase in re-sales next year
• Only took 12-14 months from peak to peak for this recovery
• Bank of Canada has made a commitment to maintain the overnight rate as is until mid 2010
• Rates will increase but very gradually

Exports:

• 2 years ago approx. 70% of exports went to the U.S.
• Last year approx. 53%
• Canadian exports increasing with China

BC economy to expand in 2010

• Migration grows population thus increased housing demand
• Trade will increase with the U.S.
• Labor market increases and wages increases

Will the events of the past year affect consumer spending?

• Greater wealth in Canada due to real estate wealth (not the same equity loss as in the U.S.) thus less impact.
• In the U.S. it is estimated that 0.15 cents of consumer spending is lost with every $1 of real estate wealth lost – huge impact.

The next homebuyers:

• Baby Boomers – 29% of the BC population are Baby Boomers.
  • Buying 2^nd residences or resort properties
• New Canadians – within 6 months of arrival 17% will be home owners
• After 4 years more than 50% will be home owners (approx 55%)
• China, India, Philippines and S. Korea are the largest new comers to Canada

In summary for BC Outlook:

• Prices to stabilize in 2010
• Low mortgage rates
• Strong re-sale market
• Increased housing starts

Vancouver Housing Outlook:

• 40k net migration of people next year – resulting in 16-18,000 households needed in Vancouver
• 35% rental and 65% owner occupied
• 9000 housing starts – period of under building
• Unemployment to remain high
• 6.5% 2009 to 6.7% in 2010
• Unemployment rate will spike after the Olympics due to large number of workers looking for new employment

Prices:

• Average monthly payments as of Sept is 30% lower than at the peak price period (due to lower rates and drop in prices)
• Prices expected to go up 4.3% in Greater Vancouver in 2010
• In Greater Vancouver to have a detached home you required a 150k household income with a 25% down payment (and limited other debts)
• Downtown condos have seen a 9% increase in value since the peak 2 years ago!  That one surprised me.
• Currently a 9-10 month supply in the condo market

Canadian vs. the U.S. Financial Crisis Losses

• Canada has approx. 23 billion in losses
• The U.S. has approx. 1.081 TRILLION in losses…. Quite the difference!
• A 10:1 ratio is normal between the US and Canada – this equates to approx a 50:1 ratio!!  Shocking.

The UK has seen 180% house price increases, 100% in the Nethelands, hence Canada is not that bad in the greater picture.

Mortgage Arrears:

• In August 2009 Canadian mortgage arrears were at 0.43%
• In Q2 of 2008 the U.S. was at 9.24%!!!
• 18 year Canadian average is 0.42%.

Why?

• Sound regulations
• Prudent lenders
• Sound institutions
• More conservative mortgage market
• Our banks keep a large percentage of their mortgages on THE BANKS books.  Not sold off getting rid of any risk, therefore they are underwritten prudently.

I hope this has been informative.